Start thinking about saving
Saving money is something that most of us know we should do. But even though we know we should, some of us are better than others at actually following through on putting away cash for our future needs.
It can be very difficult to form the habit of regularly building our savings account balance because it’s very easy to put off saving for things we don’t have an immediate need for. Even more so when it seems there is never any money left over at the end of the month.
Why save for your children’s college education when they need school supplies today? Why save for a down payment on your first home purchase when the rent is due next week? It can be hard to juggle present and future needs, but it must be done to ensure that life becomes easier as you take an active role in becoming more financially secure.
Get ready to save
To begin a savings program, you must first know where your money is going each month. Start out by drawing up a realistic budget. Begin with listing your set monthly expenses and the minimum that it takes to cover your flexible expenses such as food and fuel. Then list your regular income. Don’t include part-time or hobby income unless the earnings are consistent or accurately predictable.
Eliminate any credit card balance or other high-interest debt that is carried month-to-month before you start socking away cash. The interest paid on a savings account is minimal – almost laughable – so don’t count on the interest earnings to help you build your savings fund.
Once your high-interest debt is eliminated, finding the extra money to save can be easy; just start saving the money you were using to make payments for credit cards and other high-interest debt.
Find money to save
If you didn’t start with any debts or credit cards to pay off but still have difficulty in finding cash to save, it is likely that you are using up all your resources to get through each month. You may find that you have to cut out some of the extras to find the cash to save. Take a deep look at your budget to figure out where you can make cuts.
They don’t have to be painful cuts, and you’re more likely to stick with your savings plan if you still allow yourself a reasonable amount of enjoyment. You may find money to save by canceling memberships you rarely use, eating out less often, or by reducing a daily habit that you can do without.
Save money by looking at store brands instead of national brands for food and disposables. In most cases I’ve found the generic brand to be just as good of quality, but of course some brands cannot be replicated for certain things. Try it out, if you don’t like it you can always go back to what you like. (The biggest issue I’ve found with some store brands is with the packaging – biscuit cans that are almost impossible to open or cheese singles that are difficult to peel in one piece. Sometimes it’s worth paying the extra so you can open what you’re trying to eat.)
Also consider buying big-ticket items used. You can find great items in like-new condition for a good price at garage sales, classified ads, and thrift stores if you look in the right areas. For things like furniture, sporting goods, and appliances, it doesn’t even matter if someone used it before you if they took good care of it and sold it to you at half price or better.
By cutting costs where it’s easy, you’ll free up cash to begin building your savings. If you cut all the easy expenses and still can’t find the money to save, you may find that you’ll have make make a real sacrifice or two. But one day when you need the funds, you’ll be glad you had the foresight to build your savings.
Save!
A relatively painless way to build your savings is to use your paycheck to make even-hundred dollar deposits to checking and put the remainder in savings. So for example, if your paycheck is $975, deposit $900 to checking for regular bills and expenses, and deposit $75 to savings. If your budget allows and the $800 is enough to get you through the pay period, you can choose to put in $175 if you want to boost your savings even faster. This method is easy because you truly “pay yourself first” and put away the money before you even get a chance to miss it or think you need to spend it. An extra bonus is that simplifies balancing your checkbook.
Many like to treat their savings deposits just like another monthly bill, and write a check or instantly transfer an amount from checking to savings on a regular due date. This may work better for those with unpredictable income through the month; it allows flexibility in deciding how much to save once all the other bills are paid.
Others don’t have a routine, but simply save extra money when they get it. Bonuses from work, extra money from hobbies, cash from the sale of a big-ticket item, and tax refunds can all be the source of “extra money” that isn’t worked into your regular income or your budget. There’s nothing wrong with saving this way and it’s certainly better than not saving at all, but be aware that it will be difficult to build a substantial savings for college or retirement unless you receive and save these types of “extra” funds on a regular basis.
Whatever system you choose, be sure that it works for you. It is hard to stick to a program for very long if it leaves you feeling overworked and undernourished, so if that’s the case, you may find that you need to allow yourself a little luxury or at least the occasional pat-on-the-back for working so hard towards your financial goals.
But if you choose the savings method that works for you, it will bring you great satisfaction each time you look at your savings balance and see it getting bigger and bigger by the year.
